Crude falls to 12-year low 6-15-98

Mary Kennedy

Crude oil tumbles to 12-year low

By Mary Kennedy, CBS MarketWatch Last Update: 6/15/98 8:00:00 PM

NEW YORK (CBS.MW) --July crude oil dropped 8.2 percent and hit a new 12-year low Monday as traders remain nervous about weakening Japanese demand. Japan imports 90 percent of its oil supply and as the Japanese economy struggles, demand for oil declines.The U.S. dollar gained additional strength against the Japanese yen, at an eight-year high.

In addition, the possibility that Iraqi export sanctions could be lifted pressured the oil market. The United Nations imposed sanctions on Iraq in 1990 after Iraq invaded Kuwait. Before the sanctions, Iraq was the fourth largest supplier of oil to world markets. Sanctions will only be lifted if U.N. chief weapons inspector Richard Butler reports that Iraq no longer possesses any weapons of mass destruction.

Traders will look for production cuts out of the June 24 meeting of the Organization of Petroleum Exporting Countries. On the New York Mercantile Exchange, July crude oil fell $1.03 to $11.56 per barrel.

July heating oil fell 1.42 cents to 36.70 cents per gallon and July unleaded gasoline fell 1.36 cents to 44.94 cents a gallon as the sharp decline in crude oil caused affected the prices of oil products.

In other commodities-trading highlights:

July coffee may further its recent declines amid a bearish report from the Green Coffee Association. After the close, the GCA reported an increase of 135,000 bags in U.S. supplies as of May 31, growing to 1.997 million bags of coffee in warehouses. The start of the low-demand summer season is cited for the decline.

In addition, there are still no signs of frost in Brazil in near-term forecasts, increasing the possibility of a record crop in the No. 1 coffee- producing nation. Above-average rainfall and warm temperatures in Brazil are expected to have produced the biggest coffee crop in 11 years. July coffee fell 1.8 cents to $1.1995 per pound on the Coffee, Sugar and Cocoa Exchange.

July copper fell 2.8 percent, pressured by continued weakness in the Japanese economy, the top consumer of industrial metals. Losses were limited, however, as copper stocks in London Metals Exchange warehouses declined 1,900 metric tons to 255,000 metric tons. July copper fell 2.1 cents to 73.30 cents per pound on the Commodities Exchange division of the New York Mercantile Exchange.

July natural gas rose 1.7 percent as traders bought the market on weather forecasts calling for more warm weather in southern part of the U.S. Temperatures are expected to be above-normal short-term in Texas and the Southeast, sparking demand for electricity to run air conditioners. July natural gas rose 3.5 cents to $2.07 per BTU on the New York Mercantile Exchange.

September palladium fell 1.3 percent as traders remain nervous about the weakening Japanese yen. Japan is the world's leading consumer of white metals. September palladium fell $3.60 to $268.00 per ounce on the Commodities Exchange division of the New York Mercantile Exchange.

July corn fell 1.5 percent after Midwest corn fields received some much-needed rain over the weekend, increasing growth potential. Traders are focusing on the quarterly grain stocks report and the yearly acreage report to be released June 30. July corn fell 3.4 cents to $2.326 per contract on the Chicago Board of Trade.

July wheat fell 1.7 percent amid a bearish weekly export inspections report. Early in the session. the U.S. Department of Agriculture reported 10.28 million bushels of wheat inspected for export vs. 16.77 million bushels the previous week. July wheat fell 4.6 cents to $2.744 per contract on the Chicago Board of Trade.

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